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Private equity fund managers to increase exposure to energy sector over next five years

93% of PE investors said they planned to make at least one investment in an energy-related assets by 2026, according to Recovery to Rediscovery: Capitalising on a Changed Private Equity Landscape, a study commissioned by Auxadi. Of these, over half (51%) stated they were “extremely likely” to invest in energy.

Governments’ clean energy push to benefit private sector

The research highlights general partner (GP) appetite for  renewable energy, with 89% of investors describing the outlook as positive, of which a third (33%) say it is “very positive”. Almost two-thirds (62%) of investors believe that pandemic-driven government commitments to green infrastructure investment, such as the $2trn clean energy infrastructure plan introduced by President Joe Biden in the US, are most likely to influence investor allocations to private equity over the coming two years.

Victor Salamanca, CEO at Auxadi said: “Rising demand for electricity and surging coal and gas prices reflect an extremely tight energy supply that shows little sign of rebalancing any time soon. With COP26 fast approaching, private equity allocations to energy and renewables in particular will continue to soar as GPs capitalise on a compelling opportunity to generate outsized returns and pursue their sustainable investment commitments.”

LGIM expands thematic offering with Clean Energy ETF

Over half (52%) of respondents cited the need for GPs to pivot towards to sustainable investment strategies and a similar number (51%) highlighted the falling costs of building renewable energy assets. Only half this number of GPs (26%) believe that meeting carbon reduction and climate goals will have a tangible influence on renewable allocations in the next two years.

According to BloombergNEF data, private equity investment in renewables totalled $2.6trn between 2010 and 2019, and the trend is set to accelerate in 2021 as renewable generation is expected to surpass oil and gas to become the largest area of energy spending.

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